Old Second Bancorp in Aurora, Ill., has agreed to buy West Suburban Bancorp in Lombard, Ill.
The $3.3 billion-asset Old Second said in a press release Monday that it will pay $297 million in cash and stock for the $3 billion-asset West Suburban. The deal, which is expected to close in the fourth quarter, priced West Suburban at 122% of its tangible book value.
West Suburban has 43 branches, $1.5 billion of loans and $2.6 billion of deposits.
“West Suburban is a franchise we have known and respected for a very long time,” James Eccher, Old Second’s president and CEO, said in the release.
“This combination is expected to significantly enhance our financial strength, our position in Chicago and our ability to invest in building the best bank for our customers and communities,” Eccher added. “From our perspective, we do not believe there is another partner who could deliver us the same level of complementary geographic reach, scale on current products and services, upside and long-term shareholder value.”
The deal is expected to be 38% accretive to Old Second’s earnings per share in the first year of combined operations. It should take about five years for Old Second to earn back an estimated 18% dilution to its tangible book value.
Old Second plans to cut 37% of West Suburban’s annual noninterest expenses. The company expects to incur $31 million in merger-related expenses.
Citigroup Global Markets and Nelson Mullins Riley & Scarborough advised Old Second. Keefe, Bruyette & Woods, Kirkland & Ellis and Barack Ferrazzano advised West Suburban.